Crude Oil Steady Above USD61 Despite Shale Boom

Oil prices stable on healthy demand

Oil prices stable on healthy demand

With outside producers expected to increase supply by more than demand, OPEC cut its estimate of the global requirement for its crude in 2018 by 250,000 bpd to 32.61 million bpd.

West Texas Intermediate for April delivery rose 23 cents to settle at $61.19 a barrel on the New York Mercantile Exchange. This may be a tricky situation, because it demands OPEC to further extend its production cuts.

"In the longer term, the ability of OPEC to control production and prices is questionable, given the gradual adjustment of participating producers to lower oil prices and their unwillingness to cede market share to US shale producers", the report said. The South American country continues to slog through an economic crisis precipitated by years of government mismanagement and exacerbated by a prolonged oil price slump. Brent crude futures were at $64.91 per barrel, near their previous close.

Oil held gains near $61 a barrel on signs of robust fuel consumption in the U.S. and as OPEC's compliance with its pledged output cuts soared to a new record.

The US supply increase is expected to come as the Organization for Petroleum Exporting Countries, dominated by oil giant Saudi Arabia, works with Russian Federation to slash output after prices for crude plummeted to around $30 (RM118) per barrel in 2016 from over $100 (RM392) two years earlier.

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Following years of sharp output losses, Venezuela's crude output is projected to tumble to 1.38 million barrels per day (mb/d) by the end of 2018, according to the IEA.

In 2017, world oil demand growth is revised higher by 23 tb/d from February's assessment to reflect the latest data.

While Venezuela boasts the world's largest proven oil reserves, crude production in the state has been steadily declining in recent years. The Energy Information Administration reported yesterday that last week's production hit 10.38 million bpd, up from 10.37 a week earlier.

The IEA said global crude demand would pick up this year, which was "reassuring" to investors, said Phillip Streible, senior market strategist at RJO Futures in Chicago. Despite a big move up in the U.S. dollar yesterday, crude oil managed to eke out small gains.

Another grim disclosure with the potential to influence traders in coming days was provided by Bloomberg, which noted that although Saudi Arabia remains committed to the Organization of the Petroleum Exporting Countries' (OPEC) objective of restoring inventories to their normal levels, "OPEC shipments will rise by 100,000 bpd in the four weeks to March 31, according to tanker tracker Oil Movements".

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